Report: Keystone XL job claims are exaggerated

TransCanada’s claims that an estimated 20,000 construction and manufacturing jobs would be created if the Obama administration approves the controversial Keystone XL pipeline are “significantly inflated,” according to a new analysis of the project released today.

The economic effects of the project have emerged as a major issue during public meetings this week along the pipeline’s 1,700 mile route, and they are a key factor in the State Department’s analysis of whether Keystone XL is in the “national interest.” Secretary of State Hillary Clinton is expected to make that determination before the end of the year, possibly as early as mid-November.

The latest study from Cornell’s labor institute says those claims are flawed, because they are pegged to a potential project budget of $7 billion, which could be nearly double what really goes into construction of the U.S. portion of the pipeline. According to TransCanada’s permit application, the capital cost of the U.S. portion of the project is estimated to be $5.4 billion.

The Cornell analysts also say that if Keystone XL’s construction results in potentially higher gasoline prices in Midwest markets by raising the cost of oil sands crude sold to refineries, the additional fuel costs would suppress other spending and ultimately kill jobs.

Keystone XL would link oil sands developments in Alberta, Canada with Gulf Coast refineries, expanding an existing pipeline that now ends in Cushing, Okla. Because the oil sands crude is now essentially trapped in that Midwest market — without easy transport options to east Texas — refineries in the region have been able to buy it at a discount. If Keystone XL is approved — expanding the U.S. market for oil sands crude and giving Gulf Coast refineries easier access to the product — the discount is sure to disappear.

Sean Sweeney, director of the Global Labor Institute, said the findings show that “the United States should be highly skeptical of KXL as an important source of American jobs.”

But even one new job in the U.S. is a benefit that shouldn’t be dismissed, said Rayola Dougher, a senior economic adviser for the API. She said it made no sense for “people in their ivory towers (to be) fighting against even one job” that could be created by the project.

And even if job-creation claims turn out to be half of what has been forecast — 10,000 instead of 20,000 — Dougher said that is a major “opportunity” for the United States.

Dougher also noted another possible economic benefit from the pipeline — that U.S. oil money would be going to a country that spends heavily in America. “Every dollar we spend on Canadian oil, they spend 90 cents on the United States,” Dougher said.

In a statement, API called the Cornell report’s conclusion “preposterous.” The trade group added:

“The Keystone XL pipeline promises to be a massive job creator, and to attempt to stop its approval is an affront to the 25 million Americans who are either unemployed or underemployed.”

The fight over the economic effects of Keystone XL is just the latest battle over the pipeline, which has pitted environmental advocates against the oil industry for the three years that TransCanada has been pursuing a presidential permit for the project.

The fate of Keystone XL lies in the Obama administration’s hands, because it would cross the U.S.-Canada border.

Environmentalists worry that the pipeline would expand the marketplace for diluted bitumen and synthetic crudes that are estimated to produce more greenhouse gas emissions over their entire life cycles — from production to combustion — than some alternatives. Conservationists and some landowners along the planned route also have sounded the alarm about possible spills that could taint groundwater supplies, particularly the Ogallala Aquifer that supplies drinking water to roughly 2 million people.

Oil industry leaders and congressional Republicans argue that Keystone XL is essential to supply the U.S. with crude from a friendly North American ally.